Last weekend, in my Market Forecast, I said,
"For the new week, we have to see how this swine flu fear affects the markets. Both SPX and Nadsaq finished last week on a strong note. Both charts are showing the MACD turning back up. Techs and financials are still quite strong. We'll have to see if energy-sectors can continue to push higher. During these past two weeks, the market has had a hard time breaking above the key resistances: SPX 875 and Nasdaq 1700."
Early in the week, the market did indeed seem to be affected by the uncertainty surrounding the "swine flu". But, on Wednesday, the market jumped with energy sectors pushing higher. Techs and financials stayed strong. On Thursday, the market rose above SPX 875 in the morning, and we cashed out on our gains before the market slid lower in the afternoon. Thus, finishing off our April's trading on a high note! On Friday, the energy sectors went up again, giving SPX's first close above 875 in 3 months!
In our Sector Watch last weekend, we also looked at XME (metals and mining), OIH (oil services), and USO (oil). We continued to discuss the importance of the energy-related sectors to the health of this rally. Energy sectors finally went higher and helped to sustain the rally's momentum.
For the week, the Dow finished up +136.12 points; SPX added +11.29 points; Nasdaq gained +24.41 points. Both Nasdaq and SPX finished above their respective key resistances: SPX 875 and Nasdaq 1700! Let's see how these indices look after Friday:
SPX
On Friday, SPX added +4.71 points to close at 877.52, above the 875 level. Its 10-day MA went higher.
Nasdaq
Nasdaq added +1.9 points to close at 1719.2. Its daily MAs and MACD were up.
The market finally pushed higher with both Nasdaq and SPX closing above their key resistances. This is a bullish sign for the market. Energy sectors were strong last week. Techs held up well also. But, the financials stayed flat, ahead of the "stress test" results. VIX slid lower. SKF (financials ultrashort) was volatile within a tight range; it recorded a new all-time low, breaking below $54. However, it bounced back and closed at $58.409. At the time of this writing, Asian markets look very strong to start the new month. For the new week, the "stress test" results on banks will likely be a mover for the market. Meanwhile, much attention seems to be shifting towards energy sectors. Techs are still healthy and Nasdaq should push to perhaps test 1800. For SPX, 900 is the next resistance. Let's take a look at some key sectors for next week:
Sector Watch
XLF (financials)
XLF was flat last week and closed below the resistance at $11. The "stress test" results on the banks will undoubtedly move XLF one way or the other. GS went higher last week, and MS recovered from the slump after its earnings. We'll monitor how the financials move before the stress test results come carefully.
XME (metals and mining)
XME jumped last week, closing above the resistace at $32. It went all the way above $34 before pulling back a little. The MACD is displaying a new bullish crossover and its daily MAs are curving up again. Coal stocks were very strong last week. ANR, BTU, CNX were among the favorites. FCX charged up again.
XLE (energy)
XLE broke above the resistance at $46 last week. Its daily MAs are showing a new bullish formation and the MACD has a new bullish crossover. We already played APA on Friday and scored over +100 on the same day! DVN, HES, OXY could be among the next ones to jump.
PBW (clean energy)
PBW finally jumped higher after FSLR's very impressive quarterly report. Solar companies are looking very strong. TSL added +12.45% on Friday. Both FSLR and SPWRA pulled back on Friday and could reveal good re-entry points. YGE and STP also look good.
Hope you've had a restful weekend!
Good night and HappyTrading! ™
